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The Importance of Trust
Funding
When you plan your
estate and your living trust documents are drafted, the work is not
completed -- it's just beginning! To ensure that you
get the full value of your living trust and that your estate plan
works as designed, your living trust must be properly
"funded." Trust "funding" is the process
of transferring your assets to your trust(s) during
lifetime.
An unfunded
trust is like a car with an empty gas tank: neither will get you
where you need to go! While trust funding is a
critical aspect of successful estate plans, it's also also one of
the least accomplished tasks. Why? Because trust funding
is among the most
complex and challenging tasks associated with living trust-centered
estate plans. As important as trust funding is to clients,
it's surprising more attorneys don't help them with it. During
lifetime some trusts are only partially funded. Many trusts
are never funded at all. Regrettably, several factors
contribute to this problem.
Clients often lack
the time to manage their own trust funding. Most do not possess the
legal expertise needed to fund a
living trust accurately and completely. Some simply forget to
fund their trusts as they should. To make matters worse, many
attorneys don't offer their clients assistance in funding their
trusts after their trust documents have been drafted. Deficiencies
in trust funding too often result in estate plans not achieving the
clients' objectives.
This conclusion does
not suggest that estate planning clients lack
sophistication. Or that the majority are not willing to
dedicate
themselves to the work that a successful estate plan
requires. On the contrary, clients who are devoted to the
well-being of their loved ones demonstrate a strong
commitment to planning their estates well. But successful
estate planning is more than elaborate documents. It's also
about organizing and managing the administrative matters that make
estate plans work. Because the legal complexities of
trust funding impact greatly on the success of an estate plan,
clients should be realistic in their expectations of the trust
funding process.
Trust funding is
complicated. It can be laborious and cumbersome to
coordinate. Trust funding also needs to be tailored to the unique
circumstances of each client, each family, and each estate. No
one trust funding strategy is right for every client or every estate
plan. More importantly, no one trust funding strategy is
appropriate for every asset type or every legal jurisdiction.
Each type of asset — whether real estate, retirement plan, life
insurance, or stocks — has its own trust funding considerations
unique to the characteristics of asset itself. The more
education you have, the better the trust funding process
will proceed. Without knowledge, it's possible to commit a grave error that runs
contrary to the plan itself or that creates unwanted tax or legal
consequences. In short, trust funding is not for
the uniformed.
The good news is that,
with some education and the assistance of a caring and conscientious
attorney, your trust can be funded skillfully. Talented
attorneys around the country manage and fund thousands of trusts
with a high degree of accuracy and success. And the work you
invest in lifetime management of your estate plan pays big dividends
to your loved ones. The post-mortem administration of your
trust after death should flow more smoothly and work as you designed
it when you originally planned your estate.
Not to fund your living trust or to
fund it haphazardly will in most circumstances
ensure the failure of your estate plan to meet its
goals. Our objective is to help estate planning clients
become more informed about the intricacies of trust funding and
avoid the potential pitfalls. If
you discover that the process requires too much time or expertise,
we can help locate skilled legal counsel with
trust funding experience who can assist in ensuring that your estate plan is funded accurately and completely.
Remember that funding is not a one-time event; trust
funding should be maintained over the course of your
lifetime. That means not just funding your assets
today, but also transferring newly acquired assets as your
financial situation changes with time.
Trust funding is sufficiently
complicated and fraught with risks that we strongly recommend that clients
fund their trusts under the careful direction of a qualified estate
planning attorney or simply hire an estate planner with trust funding expertise
to take full responsibility for completing the trust funding.
We are pleased to offer
a program to
identify estate planning attorneys who offer trust funding services.
Simply click on our Find An
Attorney page to learn about estate planning practitioners in your
area.
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